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CML says house prices are set for soft landing

The housing market is heading for a soft landing rather than a 1990s’ style crash, says the Council of Mortgage Lenders.

House price growth is slowing but the lack of significant month-on-month falls in house prices indicates that a sharp price collapse is unlikely and the main impact is transaction levels easing.

Most of the main house price measures, including Halifax, Nationwide, Home Track and the Land Registry, all show that property prices peaked in the summer. The exception is the Office of the Deputy Prime Minister, which has the peak at November.

Monthly data has proven volatile, with the ODPM data putting November as the highest growth month of 2004 while Halifax said prices fell that month.

CML senior economist Jennet Siebrits says despite the discrepancies, the evidence of a slowdown is overwhelming on aggregate. The Royal of Institution of Chartered Surveyors says the stock of unsold properties on surveyors’ books rose by 9 per cent last year.

Siebrits says the shift in favour of the buyer is reflected in the increase in the average discount from asking prices, which has risen to 4.9 per cent from 2.8 per cent six months ago.

Inland Revenue data reveals that transactions fell from 150,000 in September to 137,000 in October and 110,000 in Nov- ember. These sharp falls are mirrored in CML data which shows that the number of house purchase loans fell to 83,000 in November, the lowest level since February 2003.

Siebrits says: “The housing market is undoubtedly under way but there are encouraging signs of a soft landing. House price growth is clearly moderating but there is no sign of a sharp collapse.”


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